Oxford and Cambridge universities have joined the increasingly bitter row over Chancellor George Osborne's controversial cap on tax relief for charitable donations.

Andrew Hamilton, vice-chancellor of the University of Oxford, has written to Mr Osborne warning that the plan "risks undermining the culture" of university philanthropy, The Times reported.

A university spokesman told the paper: "The generosity of Oxford's donors provides huge public benefit, contributing to teaching, research and student bursaries.

"We have done our best, along with other universities and charities, to foster a culture of giving in the UK, and this move risks undermining that culture."

Sir Leszek Borysiewicz, vice-chancellor of the University of Cambridge has also written a private letter to Mr Osborne expressing his concern, the paper said.

Senior Liberal Democrat Cabinet minister Vince Cable yesterday let it be known that he was "sympathetic" to concerns raised by universities that funding for scholarships and research could be hit by the move.

Meanwhile Arts Council England warned at least £80 million in regular donations to its organisations was at risk, while a new £55 million "matched funding" scheme with the Department for Culture, Media and Sport (DCMS) could also be in jeopardy.

Mr Cable's intervention came after the umbrella body Universities UK wrote to Mr Osborne warning that they were likely to be "particularly hard-hit" by the cap as they relied heavily on big donations.

"Concerns have been raised with ministers including Vince by universities and he's sympathetic to those concerns," a spokeswoman for Mr Cable said.

"We will make sure that what we are hearing from universities is fed back to the Treasury."

Universities UK chief executive Nicola Dandridge said the cap could undo much of the progress universities had made in raising funding from private donors.

"Universities raise considerable sums from philanthropic gifts, £560 million cash in the last year," she said.

"These donations make a major contribution to the support universities can offer students through bursaries, scholarships and improved facilities such as libraries. It also contributes to advancing research.

"Because universities are the preferred cause of major donors - gifts over £1 million - we anticipate that they would be particularly hard-hit by the change in the Budget.

"After a period in which universities have stepped up their game in fundraising, this could undo some of the excellent progress they have made."

David Davis, a former chairman of the public accounts committee, told the Guardian ministers should reconsider their plans.

"If the Government's aim is to prevent tax avoidance, it would be better to ensure donations are approved by the Charity Commission," he said.

"Or if the charity is based abroad, it should be subject to review by [Revenues & Customs]. If the government's aim is simply to raise money from philanthropists, the government should say so."

Arts Council England chairwoman Dame Liz Forgan said donations to arts organisations were also likely to suffer as wealthy backers looked again at the amounts they were prepared to give.

"We think that at least £80 million worth of regular donations to several of our largest organisations would be at risk and there could well be a wider impact than that," she told BBC Radio 4's The World at One.

"It is actually very difficult for arts organisations to raise private money, it's hard work and seeing a concession from the taxman really does
help. It is a critical ingredient in the package.

"So I'm afraid that unless something changes this will make a big difference."

In particular she pointed to a new £55 million "matched funding" scheme set up by Arts Council England with the DCMS and the Heritage Lottery Fund designed to encourage wealthy donors to fund endowment to arts organisations.

"I think a lot of organisations who applied for that money did so with an understanding with potential donors as to what they might raise. I think all those plans are probably now up in the air," she said.

Her concerns were echoed by the senior Conservative MP John Whittingdale, who chairs the Commons Culture, Media and Sport Committee.

"There is a real danger here that we throw out the baby with the bathwater. The Government has set great store by trying to increase philanthropy in support of the arts and good causes and this clearly won't help," he said.

"To say that we are going to put an arbitrary cap as the Budget has done on the amount of tax relief that can be claimed just seems to me to send a very contrary signal to all the messages that the Government has been putting out up to now."

Treasury Minister David Gauke insisted the Government stood by the "broad principle" of the cap in order to stamp out "abuse" of the system by wealthy individuals who used tax relief to minimise their income tax payments.

But after David Cameron said during his tour of the Far East that he was "very sympathetic" to the concerns raised by charities, Mr Gauke said the Treasury was looking at how it would be implemented.